Watch Out For These Scams!

| April 11, 2014 | 0 Comments

This is part three of my series covering the basics of gold and silver coin investing.  As you know, we’ve discussed quite a bit of information the past few weeks, including…

  • The difference between numismatic investing and bullion investing.
  • Who mints gold and silver bullion, and why it’s important to know the difference.
  • The distinction between bars, rounds, and coins, and premiums each should sell for.

Believe it or not, I’m just scratching the surface when it comes to all the knowledge needed to invest in gold and silver coins effectively.  But what we’ve covered over the past few weeks will get you started in the right direction.

Speaking of getting off on the right foot…

There are plenty of coin scams that beginning investors need to watch out for.

Thanks to the surge in coin investing popularity, dubious characters are quick to take advantage of unwary buyers. 

Remember, if you’re looking diversify your portfolio into precious metals, the last thing you want to do is overpay for your investment.  If you do, even a dramatic rise in gold and silver prices may not be enough to recoup your initial purchase price. 

Here are a few common coin schemes investors should avoid at all costs…

No matter how good the sales pitch, never buy gold and silver coins from a TV offer… EVER.   

It should come as no surprise that TV shopping channels and commercials are very good at selling stuff.   And that’s precisely why less than honorable private mints jump at the opportunity to peddle overpriced products on the air.

The most commonly found “coins” on TV shopping shows and commercials are of the commemorative variety.   By displaying an emotion-evoking image on the coin, they lure in unsuspecting buyers.  For example, coins may be emblazoned with an image of a very recent or current US President.  Or maybe the coin is commemorating the 9/11 attacks.

Unscrupulous sellers set the hook in their potential buyers by claiming their coins are clad in 24-carat gold or .999 fine silver, further increasing the desirability.

But here’s the real deal…

Whenever you here the term “gold or silver clad coins”, change the channel.  

Even though the gold may be 24 carat or the silver .999 fine, clad coins are virtually worthless from an investment standpoint.  You see, these imposters typically have less than $1 worth of actual silver or gold in them.  But that doesn’t keep them from being sold for $10 or more a piece.  Talk about a premium!

So unless you like very expensive souvenirs and paperweights, stay away from TV shopping channels and commercials touting gold and silver clad coins. 

If you’re unsure, just remember that it’s virtually impossible to find bargains in the coin industry. 

In other words, if somebody is touting an “incredible, one-time offer” on gold and silver coins, there’s a 99% chance they’re bogus.  Legitimate coins, rounds, and bars will never sell below the spot price of gold and silver.

Now with that said, you may come across a genuine US Government minted gold or silver coin on a TV shopping channel…

Remember, government minted coins have an intrinsic guarantee of weight, content, and purity.  So it’s normal to find a price premium attached to these authentic pieces.

But in almost all instances, you’ll be able to find US mint coins cheaper from a local or internet dealer than you’ll find on a TV shopping channel.  Let me say it again, TV shopping channels are very good at selling stuff- that’s why overpriced products are sold there!

The most commonly overpriced US mint coin is the Morgan Silver Dollar…

Touted as a great bullion investment by many, Morgan Silver Dollars should only be bought by someone well versed in numismatics.  You see, from a bullion investors’ standpoint, there’s only .7732 troy ounces of silver in a Morgan Silver Dollar.  Yet you’ll find these coins can sell for many multiples of the spot price of silver.

In a nutshell, Morgan dollars should be considered a rare coin investment.  And as I’ve stated before, rare coin investing is a different animal than bullion investing.

It all comes down to this…

As an investor looking to hedge against risks in the global financial system, your goal should be to acquire authentic bullion as close to spot price of gold and silver as possible.  Don’t be led astray by slick salesmen pushing commemorative junk and coins you don’t understand.

When in doubt, stick with rounds and bars carrying a small premium to spot.  And if you’re willing to pay a premium, go with the official guarantee of government minted coins.

Until Next Time,

Justin Bennett

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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